TaxTMI 
TaxTMI 
2014 (8) TMI 607
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....Section 68 of the Foreign Exchange Regulation Act, 1973 ("FERA") and imposing a total penalty of Rs. 1 lakh each on certain directors of Modi Xerox Limited ("MXL") including the Appellant and Rs. 5 lakh on MXL. 2. The Appellant states that he was a part time, non-executive director of MXL but neither in-charge of nor responsible for the conduct of its day-to-day affairs. MXL commenced its business in the year 1983-84 and had been importing goods/raw materials for its business requirements. MXL was amalgamated with Xerox Modicorp Limited ("XML") in the year 2000. Till 2001, it imported goods worth more than Rs. 700 crores. 3. By its letter dated 1st December 1989 the Reserve Bank of India ("RBI") informed the Enforcement Directorate ("ED")....
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....been proceeded with for more than eight or ten years, including that of MXL. 6. On 19th February 2001 the ED issued a Memorandum-cum-SCN to MXL and its directors, including the Appellant herein, stating that they appeared to have violated Section 8 (3) read with Section 8 (4) of FERA. As regards the particular role of the Appellant, the SCN included the following standard cyclostyled paragraph which reads as under: "And whereas it further appears that S/Shri As per Annexure B Proprietor/Partner(s)/Director(s)/ Manger/ Secretary of the said company firm has been responsible/supervisor/in-charge of the said company/ firm for the conduct of business of the company/firm at the relevant time when the aforesaid import was made and as such he/sh....
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....n complied with, were placed at every Board meeting of MXL and therefore, its Directors had proceeded on the basis that MXL had complied with all the statutory requirements. The certified copies of the extracts of the minutes of the Board Meetings of MXL for the relevant period were enclosed. 9. By its communication dated 8th October 2003 the DD informed MXL about the hearing in the adjudication proceedings under Section 51 of FERA. A further reply was sent by XML to the ED on 21st October 2003. 10. By the AO dated 31st March 2004 the DD held MXL and some of its directors, including the Appellant, to have violated Section 8 (3) read with Section 8 (4) and Section 68 of FERA. The AO and imposed a penalty of Rs. 5 lakhs on MXL and Rs. 1 lak....
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.... every person who, at the time of the contravention was committed, was in charge of, and was responsible to, the company for the conduct of business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceeded against and punished accordingly: Provided that nothing contained in this sub-section shall render any such person liable to punishment if he proves that the contravention took place without his knowledge or that he exercised all due diligence to prevent such contravention. (2) Notwithstanding anything contained in sub-section (1), where a contravention of any of the provisions of this Act or of any rule, direction or order made thereunder has been committed by a company....
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.... sought to be made liable would know what is the case which is alleged against him." It was observed that it is necessary to specifically aver in a complaint that at the time the offence was committed, the person accused was in charge of, or responsible for the conduct of business of the company. 15. Later in Saroj Kumar Poddar v. State (NCT of Delhi) (2007) 3 SCC 693 the Court emphasized that it was necessary to make "specific allegations" to show as to how and in what manner the director is liable. In SMS Pharmaceuticals Limited (2) v. Neeta Bhalla (2007) 4 SCC 70 it was observed that there may be a large number of directors but all of them could not be held to be responsible for the conduct of the business of the company. It was pointed....
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.... and therefore, responsible under sub-Section (2) of Section 141 of the Act." 17. It is observed that in many of the SCNs issued by the ED, a standard cyclostyled paragraph is inserted to satisfy the requirement of the wording Section 68 (1) of FERA. This was noticed in the decision of this Court in Kavita Dogra v. Director of Enforcement (2014) 182 Com Cas 376. A mechanical repetition of the words of the statute may not be sufficient as explained by the Supreme Court in National Small Industries Corporation Limited v. Harmeet Singh Paintal (supra). This has also to be examined in the context of stand taken by the concerned director to whom notice had been issued. 18. In the present case the Appellant gave a separate reply on 9th April 20....